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The relationship between a company and its in-house corporate counsel involves a fragile mixture of the corporate counsel’s fiduciary obligations as the company’s attorney and the company’s legal and contractual responsibilities as the attorney’s employer. Although these roles and expectations often blend smoothly, the relationship can become problematic when the corporate counsel’s position as an attorney conflicts with the counsel’s status as an employee. Put another way, when a company’s expectations as a client are at odds with its responsibilities as an employer, the relationship between the employer-client and the employee-attorney can become strained and expose each to difficulty, if not liability.
One situation that may breed such tension occurs when an in-house attorney enters into a long-term employment contract with an employer-client. In a typical attorney-client relationship between a company and its outside counsel, the client may terminate its relationship with its attorney at any point. The attorney would be entitled to quantum meruit, or payment for services rendered, but the attorney would not be entitled to payment for loss of future fees, even if the client already agreed to such payment.2 In this situation, the law gives priority to the client’s right as the beneficiary of a fiduciary relationship with its attorney to terminate the relationship (the client’s “beneficiary rights”).
A long-term employment contract with a corporate or in-house counsel, however, involves subtle, but important, differences. Depending on how such a contract is structured and the current state of the law in the jurisdiction at issue, in-house counsel may have an argument that the contract obligates the client to a continued employment relationship, even if the client desires to terminate the attorney-client relationship. If true, this would infringe upon the client’s ability to terminate its relationship with its attorney immediately (or without future consequence). Enforcing this type of contract would implicitly value an attorney’s contractual rights more than a client’s beneficiary rights.
Thus, when an in-house counsel enters into a long-term employment contract with a client, a tension is created between the client’s beneficiary rights and the attorney’s contractual rights. This article addresses two issues that may arise as a result of this tension.